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Monthly Archives: August 2014

Most employers know that it is foolhardy to dismiss an employee for incapacity based on sickness unless medical evidence has been obtained to support the decision. The fairly straightforward reason for this is that a sickness incapacity dismissal will generally be unfair unless it has been established that the employee will be unfit to return to work for the foreseeable future. That is an assessment which needs to be made by a medical professional rather than the employer.

Employers can ask for a report from the employee’s GP. However, GPs tend to be influenced by the wishes of their patients so there may be a reluctance to provide such a definitive assessment. As a result most employers will obtain an independent occupational health assessment before dismissing for this reason.

The Employment Appeal Tribunal decision in Perth & Kinross Council v Gauld reinforces the need for medical evidence, but in this case in the context of a dismissal for misconduct. Mrs Gauld, a solicitor, was diagnosed as having cancer in 2008. She was off work in December 2008 and January 2009 and when she returned adjustments were made including working shorter hours. She commenced psychological counselling in late 2009. In 2010 her manager spoke to her about a query raised with her work. Shortly afterwards she went off work and never returned.

Her absence was attributed to work-related stress. However her complaint that this was caused by her manager’s behaviour towards her was rejected. Instead the Council commenced disciplinary proceedings against her as a result of the complaints made about her manager. Those proceedings led to her dismissal for misconduct and an appeal was unsuccessful.

Her resulting claim for unfair dismissal was successful. The facts of the case which emerged in the hearing are complex and remarkable. Evidence had been obtained from an occupational health consultant which stated that Mrs Gauld had concerns about the way she had been treated by her line manager and that she felt that she had been treated insensitively. Somewhat surprisingly the employer then asked her to attend a meeting to discuss her sickness absence, with her line manager. Mrs Gauld objected and a meeting took place with another manager. Prior to the meeting and based on advice from her union representative she withdrew her grievance. However her line manager was not satisfied with the outcome of the meeting. She wanted to clear her name and wanted the allegations in the withdrawn letter investigated. The investigation concluded that, taking into account a further email from Mrs Gauld, she maintained her criticisms of her line manager. A stress action plan was proposed but on the understanding that the employer did not imply in the plan that the line manager had done anything wrong. Nonetheless the line manager said that she could not participate in an action plan based on unsubstantiated allegations.

Mrs Gauld obtained a report from her psychological counsellor which attributed her stress to her line manager. Her line manager was angry about this and Mrs Gauld was suspended on the basis that “there had been no changes to her perceived stressors in the workplace”.

In the meantime there was an investigation concerning any issues that needed to be addressed concerning the line manager. Mrs Gauld said that she could work with her line manager and did not understand why an investigation was necessary following the withdrawal of her grievance. She also offered to attend mediation. Her line manager remained concerned about criticisms of her management style, said that she would find it difficult to trust Mrs Gauld in the future and that she wanted the investigation to continue because of the effect that the allegations had on her credibility as a manager. the investigation concluded that there was no evidence that the line manager had been unsupportive or inappropriate in her tone or manner towards Mrs Gauld at any time. Mrs Gauld’s union representative advised her to accept the report and get on with arrangements for returning to work. He also said that she felt vulnerable and this was as a result of her previous illness. This was not accepted by the manager reviewing the investigation. He told Mrs Gauld that the report exonerated her line manager.

The Government has announced a new Health and Work Service which is due to launch later this year. It is intended to provide assistance and support for employers, employees and GPs.

The focus will be on helping employees to stay in or return to work and it is targeted at employees who have reached or are expected to be off work for more than four weeks. The reason for this is that four weeks has been identified as the point at which an absence from work may well turn into a much longer absence.

The Service has been contracted out to Maximus, one of the largest occupational health providers in the UK. According to their website:
MAXIMUS partners with governments to deliver critical health and human services programmes that improve the lives of citizens around the world. For 40 years, our proven solutions have helped governments achieve outcomes and increase the effectiveness of their programmes. With a passion for public service, we are dedicated to providing meaningful assistance to citizens.
However, as yet, there is no mention of the new Service on the site.

There are two elements to the service. First, once an employee has reached four weeks’ absence they will be referred for an assessment by an occupational health professional. This referral will normally be made by the individual’s GP. Guidance states that referral should be the default position, unless it is clearly inappropriate. According to the Government’s press release:
The Health and Work Service will provide advice at an appropriate point to reduce the time an employee is on sickness absence. With the employee’s agreement, they are referred by their GP – the main referral route – for an occupational health assessment. They are contacted and assessed promptly, and a return to work plan provided within an agreed time limit.

Following an assessment, employees will receive a return to work plan containing recommendations to help them to return to work more quickly and information on how to access appropriate interventions.
The second element of the service is to provide advice by a phone line and a website.

One of the employment law questions I am most often asked is whether an employer can insist on changing the terms of an employee’s contract of employment. I considered the law concerning the imposition of pay cuts in October 2011. The general principle is that a variation in contract terms which operate to the detriment of the employee is prima facie unfair and can lead to claims for damages for breach of contract and compensation for constructive unfair dismissal. The standard answer is that unilateral changes may be imposed as long as there is a genuine and compelling business reason to do so. In Garside & Laycock v Booth Mr Booth was the only one of 86 employees who refused to accept contract changes. The Employment Appeal Tribunal held that it was highly relevant that most staff had accepted the change. The decision also confirmed that the business reason for the change did not need to be vital to the survival of the business.

There are numerous ways in which employers can implement changes. One is to reserve within the contract of employment the right to vary employment terms to the extent required. This may avoid a claim for damages for breach of contract but can still leave the employer exposed to unfair dismissal claims. By far the best approach is to seek to vary terms by consent after negotiation. Indeed, any changes imposed without adequate negotiations will almost certainly be unfair. Some employers seek to assist the negotiating process by offering a “sweetener” such as a one off payment.

Another approach is to terminate employment and offer re-engagement on new terms. This has become increasingly popular but no-one should be under ay illusion that it is a soft option. There is still the risk of facing claims for unfair dismissal on the termination of employment.

Earlier this year the Employment Appeal Tribunal revisited the issue. In General Vending Services v Schofield Mr Schofield was asked to agree a pay reduction of £5000 along with changes to sickness and holiday pay as part of a reorganisation. He was one of five of some 35 employees who refused to agree to the changes. He was a technician who dealt with the maintenance and repairs of coffee machines in cafés. The employer wanted to win new business in the “roast and grind” sector which required prompt repairs. The maintenance and repairs team was therefore restructured to provide for quick call outs with technicians provided with all necessary tools for on site repairs. There would be weekend working in order to provide quick repairs. Part of the process involved grading employees according to their skills.

At his employment tribunal Mr Schofield was one of five claimants. The other four failed but he succeeded because changes in holiday and sickness pay had a particular impact on him (he had a poor sickness record). He was awarded compensation of £43,452.

In June 2012 I reported the decision of the Court of Appeal in Hounga v Allen. Ms Hounga had entered the UK from Nigeria on a false passport, ostensibly to visit friends, but in fact to take up work as an au pair for a Nigerian family. She was about 14 years old and was to be paid her keep plus £50 per month. There was no doubt that the parties knew that the arrangement was illegal. She was not enrolled in a school and although she was provided with bed and board she was never paid her £50 per month or any wages at all.

Following her dismissal after 18 months she made claims for unfair dismissal, breach of contract, unpaid wages, holiday pay and race discrimination. The tribunal found that Mrs Allen had inflicted serious physical abuse on Ms Hounga and had caused her extreme concern by telling her that if she left the house and was found by the police she would be sent to prison because her presence in the UK was illegal. However, all bar the discrimination claim were dismissed on the basis that the contract was illegal. The discrimination claim was successful at tribunal and the employer appealed successfully to the Employment Appeal Tribunal. Ms Hounga appealed unsuccessfully to the Court of Appeal. The somewhat surprising reasoning was that the discrimination was so closely connected to the illegality that the claim had to fail. More controversially it was suggested that her employers would not have treated her so badly had it not been for Ms Hounga’s vulnerability as an illegal worker.

The decision was appealed by Ms Hounga to the Supreme Court, with support from the Anti Trafficking and Labour Exploitation Unit.

The tribunal had found that the circumstances of dismissal were that one evening Mrs Allen was angry when she discovered that the children had not eaten the supper which Ms Hounga had been told to prepare for them. Mrs Allen smacked and hit Ms Hounga. After the children went to bed Mrs Allen attacked Ms Hounga again, threw her out of the house and poured water over her. Mr Allen let her back into the house but then changed his mind and said that Mrs Allen could do whatever she liked to her. Mrs Allen then opened the door, told Ms Hounga to leave and pushed her out. As a result Ms Hounga slept in the garden in wet clothes. She made her way to a supermarket and was then taken in by social services.

In all the time that I have been dealing with employment claims (quite a long time!) there has been a permanent confusion concerning the tax treatment of settlement payments. Should tax be deducted from notice payments? Is there a “payment in lieu” clause in the contract of employment? Should the £30,000 exemption apply? Why should damages be taxed? Almost everyone who deals with employment claims will confront this issue at some point or another and will find people who are adamant that their respective yet conflicting positions are correct.

Now, the Office of Tax Simplification (did you know it existed?) has published a report in which it seeks to resolve these dilemmas once and for all. It has taken a while bearing in mind that it was announced in the Chancellor’s Autumn Statement in 2012. The report recognises that there is a commonly held misconception that all pay-offs fall within the £30,000 tax free exemption and similar misunderstandings concerning which parts of a settlement are tax free. The proposals are summarised as follows:
We believe that payments made in connection with a termination of employment should remain subject to income tax in principle, that certain exemptions should apply, but that these should be designed in a simpler way. We think the simplest way forward is for income tax relief to be only available in circumstances where the employee qualifies for a statutory redundancy payment. We also propose a government review of the existing exemptions, reliefs and reductions for termination payments, in order to establish in each case whether they should be retained as part of the wider reform of income tax and NICs treatment of termination payments.

Under this new relief, we propose that the level of the exemption would be a multiple of the statutory redundancy payment that the relevant individual is entitled to (or alternatively, a flat amount). All payments linked to the termination payment received by the relevant individual (including his/ her statutory redundancy payment) would be aggregated and then the income tax exemption would be applied against the value of these. Subject to this value limit, this relief could extend to any termination payments that he/ she receives – regardless of the nature of the payment.

The proposal would lead to simplification by making it easier to understand the circumstances to which the tax exemption applies (i.e. cases of statutory redundancy). Eligibility would not depend on the terms of the employment contract, as now, which favours the well-advised and can catch people out. Furthermore, there is a recognised statutory definition of redundancy, and a case to suggest that a common approach between employment and tax law is sensible.
But does this really make the tax treatment of settlement payments easier to understand and apply and any fairer?